Manila International Airport Authority v. CA

1/28/2018 G.R. No.
155650
EN BANC
MANILA INTERNATIONAL G.R. No. 155650

AIRPORT AUTHORITY,
Petitioner, Present:
PANGANIBAN, C.J.,
PUNO,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
- versus - CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
CALLEJO, SR.,
AZCUNA,
COURT OF APPEALS, CITY OF TINGA,
PARAAQUE, CITY MAYOR OF CHICO-NAZARIO,
PARAAQUE, SANGGUNIANG GARCIA, and
PANGLUNGSOD NG PARAAQUE, VELASCO, JR., JJ.
CITY ASSESSOR OF PARAAQUE,
and CITY TREASURER OF Promulgated:
PARAAQUE,
Respondents. July 20, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
D E C I S I ON
CARPIO, J.:
The Antecedents
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino
International Airport (NAIA) Complex in Paraaque City under Executive Order No. 903, otherwise
known as the Revised Charter of the Manila International Airport Authority (MIAA Charter).
Executive Order No. 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos.
[1] [2]
Subsequently, Executive Order Nos. 909 and 298 amended the MIAA Charter.
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As operator of the international airport, MIAA administers the land, improvements and
equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600
[3]
hectares of land, including the runways and buildings (Airport Lands and Buildings) then under the
[4]
Bureau of Air Transportation. The MIAA Charter further provides that no portion of the land
transferred to MIAA shall be disposed of through sale or any other mode unless specifically approved
[5]
by the President of the Philippines.
On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion
No. 061. The OGCC opined that the Local Government Code of 1991 withdrew the exemption from
real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with
respondent City of Paraaque to pay the real estate tax imposed by the City. MIAA then paid some of
the real estate tax already due.
On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City
of Paraaque for the taxable years 1992 to 2001. MIAAs real estate tax delinquency is broken down as
follows:
TAX DECLARATION TAXABLE TAX DUE PENALTY TOTAL

YEAR
E-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20
E-016-01374 1992-2001 111,689,424.90 68,149,479.59 179,838,904.49
E-016-01375 1992-2001 20,276,058.00 12,371,832.00 32,647,890.00
E-016-01376 1992-2001 58,144,028.00 35,477,712.00 93,621,740.00
E-016-01377 1992-2001 18,134,614.65 11,065,188.59 29,199,803.24
E-016-01378 1992-2001 111,107,950.40 67,794,681.59 178,902,631.99
E-016-01379 1992-2001 4,322,340.00 2,637,360.00 6,959,700.00
E-016-01380 1992-2001 7,776,436.00 4,744,944.00 12,521,380.00
*E-016-013-85 1998-2001 6,444,810.00 2,900,164.50 9,344,974.50
*E-016-01387 1998-2001 34,876,800.00 5,694,560.00 50,571,360.00
*E-016-01396 1998-2001 75,240.00 33,858.00 109,098.00
GRAND TOTAL P392,435,861.95 P232,070,863.47 P 624,506,725.42
1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75
#9476101 for P28,676,480.00
[6]
#9476103 for P49,115.00
On 17 July 2001, the City of Paraaque, through its City Treasurer, issued notices of levy and warrants
of levy on the Airport Lands and Buildings. The Mayor of the City of Paraaque threatened to sell at
public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax
delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061.
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On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The
OGCC pointed out that Section 206 of the Local Government Code requires persons exempt from real
estate tax to show proof of exemption. The OGCC opined that Section 21 of the MIAA Charter is the
proof that MIAA is exempt from real estate tax.
On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition
and injunction, with prayer for preliminary injunction or temporary restraining order. The petition
sought to restrain the City of Paraaque from imposing real estate tax on, levying against, and
auctioning for public sale the Airport Lands and Buildings. The petition was docketed as CA-G.R. SP
No. 66878.
On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the
60-day reglementary period. The Court of Appeals also denied on 27 September 2002 MIAAs motion
for reconsideration and supplemental motion for reconsideration. Hence, MIAA filed on 5 December
[7]
2002 the present petition for review.
Meanwhile, in January 2003, the City of Paraaque posted notices of auction sale at the Barangay
Halls of Barangays Vitalez, Sto. Nio, and Tambo, Paraaque City; in the public market of Barangay La
Huerta; and in the main lobby of the Paraaque City Hall. The City of Paraaque published the notices
in the 3 and 10 January 2003 issues of the Philippine Daily Inquirer, a newspaper of general
circulation in the Philippines. The notices announced the public auction sale of the Airport Lands and
Buildings to the highest bidder on 7 February 2003, 10:00 a.m., at the Legislative Session Hall
Building of Paraaque City.
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an
Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order. The
motion sought to restrain respondents the City of Paraaque, City Mayor of Paraaque, Sangguniang
Panglungsod ng Paraaque, City Treasurer of Paraaque, and the City Assessor of Paraaque
(respondents) from auctioning the Airport Lands and Buildings.
On 7 February 2003, this Court issued a temporary restraining order (TRO) effective
immediately. The Court ordered respondents to cease and desist from selling at public auction the
Airport Lands and Buildings. Respondents received the TRO on the same day that the Court issued it.
However, respondents received the TRO only at 1:25 p.m. or three hours after the conclusion of the
public auction.
On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.
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On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive
issued during the hearing, MIAA, respondent City of Paraaque, and the Solicitor General
subsequently submitted their respective Memoranda.
MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in
the name of MIAA. However, MIAA points out that it cannot claim ownership over these properties
since the real owner of the Airport Lands and Buildings is the Republic of the Philippines. The MIAA
Charter mandates MIAA to devote the Airport Lands and Buildings for the benefit of the general
public. Since the Airport Lands and Buildings are devoted to public use and public service, the
ownership of these properties remains with the State. The Airport Lands and Buildings are thus
inalienable and are not subject to real estate tax by local governments.
MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from
the payment of real estate tax. MIAA insists that it is also exempt from real estate tax under Section
234 of the Local Government Code because the Airport Lands and Buildings are owned by the
Republic. To justify the exemption, MIAA invokes the principle that the government cannot tax itself.
MIAA points out that the reason for tax exemption of public property is that its taxation would not
inure to any public advantage, since in such a case the tax debtor is also the tax creditor.
Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax
exemption privileges of government-owned and-controlled corporations upon the effectivity of the
Local Government Code. Respondents also argue that a basic rule of statutory construction is that the
express mention of one person, thing, or act excludes all others. An international airport is not among
the exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert
that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax.
[8]
Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos
where we held that the Local Government Code has withdrawn the exemption from real estate tax
granted to international airports. Respondents further argue that since MIAA has already paid some of
the real estate tax assessments, it is now estopped from claiming that the Airport Lands and Buildings
are exempt from real estate tax.
The Issue
This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA
are exempt from real estate tax under existing laws. If so exempt, then the real estate tax assessments
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issued by the City of Paraaque, and all proceedings taken pursuant to such assessments, are void. In
such event, the other issues raised in this petition become moot.
The Courts Ruling
We rule that MIAAs Airport Lands and Buildings are exempt from real estate tax imposed by local
governments.
First, MIAA is not a government-owned or controlled corporation but an instrumentality of the

National Government and thus exempt from local taxation. Second, the real properties of MIAA are
owned by the Republic of the Philippines and thus exempt from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned or controlled corporation, is not

exempt from real estate tax. Respondents claim that the deletion of the phrase any government-owned
or controlled so exempt by its charter in Section 234(e) of the Local Government Code withdrew the
real estate tax exemption of government-owned or controlled corporations. The deleted phrase
appeared in Section 40(a) of the 1974 Real Property Tax Code enumerating the entities exempt from
real estate tax.
There is no dispute that a government-owned or controlled corporation is not exempt from real
estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of
the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or
controlled corporation as follows:
SEC. 2. General Terms Defined. x x x x
(13) Government-owned or controlled corporation refers to any agency organized as a stock or

non-stock corporation, vested with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or through its instrumentalities either
wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51)
percent of its capital stock: x x x. (Emphasis supplied)
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A government-owned or controlled corporation must be organized as a stock or non-stock

corporation. MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock
corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting
[9]
shares. Section 10 of the MIAA Charter provides:
SECTION 10. Capital. The capital of the Authority to be contributed by the National
Government shall be increased from Two and One-half Billion (P2,500,000,000.00) Pesos to Ten
Billion (P10,000,000,000.00) Pesos to consist of:
(a) The value of fixed assets including airport facilities, runways and equipment and such other
properties, movable and immovable[,] which may be contributed by the National Government or
transferred by it from any of its agencies, the valuation of which shall be determined jointly with the
Department of Budget and Management and the Commission on Audit on the date of such contribution
or transfer after making due allowances for depreciation and other deductions taking into account the
loans and other liabilities of the Authority at the time of the takeover of the assets and other properties;
(b) That the amount of P605 million as of December 31, 1986 representing about seventy
percentum (70%) of the unremitted share of the National Government from 1983 to 1986 to be remitted
to the National Treasury as provided for in Section 11 of E. O. No. 903 as amended, shall be converted
into the equity of the National Government in the Authority. Thereafter, the Government contribution to
the capital of the Authority shall be provided in the General Appropriations Act.
Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.
[10]
Section 3 of the Corporation Code defines a stock corporation as one whose capital stock
is divided into shares and x x x authorized to distribute to the holders of such shares dividends
x x x. MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or
voting shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members. Section 87 of the
Corporation Code defines a non-stock corporation as one where no part of its income is distributable
as dividends to its members, trustees or officers. A non-stock corporation must have members. Even
if we assume that the Government is considered as the sole member of MIAA, this will not make
MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to
their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross
[11]
operating income to the National Treasury. This prevents MIAA from qualifying as a non-stock
corporation.
Section 88 of the Corporation Code provides that non-stock corporations are organized for
charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific,
social, civil service, or similar purposes, like trade, industry, agriculture and like chambers. MIAA is
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not organized for any of these purposes. MIAA, a public utility, is organized to operate an
international and domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a
government-owned or controlled corporation. What then is the legal status of MIAA within the
National Government?
MIAA is a government instrumentality vested with corporate powers to perform efficiently

its governmental functions. MIAA is like any other government instrumentality, the only difference is
that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government instrumentality as follows:
(10) Instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if not
all corporate powers, administering special funds, and enjoying operational autonomy, usually
through a charter. x x x (Emphasis supplied)
When the law vests in a government instrumentality corporate powers, the instrumentality does
not become a corporation. Unless the government instrumentality is organized as a stock or non-stock
corporation, it remains a government instrumentality exercising not only governmental but also
[12]
corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police
[13] [14]
authority and the levying of fees and charges. At the same time, MIAA exercises all the
powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with
[15]
the provisions of this Executive Order.
Likewise, when the law makes a government instrumentality operationally autonomous, the
instrumentality remains part of the National Government machinery although not integrated with the
department framework. The MIAA Charter expressly states that transforming MIAA into a separate
[16] [17]
and autonomous body will make its operation more financially viable.
Many government instrumentalities are vested with corporate powers but they do not become
stock or non-stock corporations, which is a necessary condition before an agency or instrumentality is
deemed a government-owned or controlled corporation. Examples are the Mactan International
Airport Authority, the Philippine Ports Authority, the University of the Philippines and Bangko
Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers but they are
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not organized as stock or non-stock corporations as required by Section 2(13) of the Introductory
Provisions of the Administrative Code. These government instrumentalities are sometimes loosely
called government corporate entities. However, they are not government-owned or controlled
corporations in the strict sense as understood under the Administrative Code, which is the governing
law defining the legal relationship and status of government entities.
A government instrumentality like MIAA falls under Section 133(o) of the Local Government
Code, which states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities and local government units. (Emphasis and underscoring supplied)
Section 133(o) recognizes the basic principle that local governments cannot tax the national
government, which historically merely delegated to local governments the power to tax. While the
1987 Constitution now includes taxation as one of the powers of local governments, local
governments may only exercise such power subject to such guidelines and limitations as the Congress
[18]
may provide.
When local governments invoke the power to tax on national government instrumentalities,
such power is construed strictly against local governments. The rule is that a tax is never presumed
and there must be clear language in the law imposing the tax. Any doubt whether a person, article or
activity is taxable is resolved against taxation. This rule applies with greater force when local
governments seek to tax national government instrumentalities.
Another rule is that a tax exemption is strictly construed against the taxpayer claiming the
exemption. However, when Congress grants an exemption to a national government instrumentality
from local taxation, such exemption is construed liberally in favor of the national government
instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:
The reason for the rule does not apply in the case of exemptions running to the benefit of the
government itself or its agencies. In such case the practical effect of an exemption is merely to reduce
the amount of money that has to be handled by government in the course of its operations. For these
reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of
[19]
non tax-liability of such agencies.
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There is, moreover, no point in national and local governments taxing each other, unless a sound and
compelling policy requires such transfer of public funds from one government pocket to another.
There is also no reason for local governments to tax national government instrumentalities for
rendering essential public services to inhabitants of local governments. The only exception is when
the legislature clearly intended to tax government instrumentalities for the delivery of essential
public services for sound and compelling policy considerations. There must be express language in
the law empowering local governments to tax national government instrumentalities. Any doubt
whether such power exists is resolved against local governments.
Thus, Section 133 of the Local Government Code states that unless otherwise provided in the
Code, local governments cannot tax national government instrumentalities. As this Court held in
Basco v. Philippine Amusements and Gaming Corporation:
The states have no power by taxation or otherwise, to retard, impede, burden or

in any manner control the operation of constitutional laws enacted by Congress to carry
into execution the powers vested in the federal government. (MC Culloch v. Maryland, 4
Wheat 316, 4 L Ed. 579)
This doctrine emanates from the supremacy of the National Government over local
governments.
Justice Holmes, speaking for the Supreme Court, made reference to the entire
absence of power on the part of the States to touch, in that way (taxation) at least, the
instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be
agreed that no state or political subdivision can regulate a federal instrumentality in
such a way as to prevent it from consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them. (Antieau, Modern Constitutional Law,
Vol. 2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru extermination of what
local authorities may perceive to be undesirable activities or enterprise using the power to tax as a tool
for regulation (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the power to destroy (Mc Culloch v.
Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has
[20]
the inherent power to wield it.
2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
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The Airport Lands and Buildings of MIAA are property of public dominion and therefore
owned by the State or the Republic of the Philippines. The Civil Code provides:
ARTICLE 419. Property is either of public dominion or of private ownership.
ARTICLE 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth. (Emphasis supplied)
ARTICLE 421. All other property of the State, which is not of the character stated in the
preceding article, is patrimonial property.
ARTICLE 422. Property of public dominion, when no longer intended for public use or for
public service, shall form part of the patrimonial property of the State.
No one can dispute that properties of public dominion mentioned in Article 420 of the Civil
Code, like roads, canals, rivers, torrents, ports and bridges constructed by the State, are owned
by the State. The term ports includes seaports and airports. The MIAA Airport Lands and
Buildings constitute a port constructed by the State. Under Article 420 of the Civil Code, the MIAA
Airport Lands and Buildings are properties of public dominion and thus owned by the State or the
Republic of the Philippines.
The Airport Lands and Buildings are devoted to public use because they are used by the
public for international and domestic travel and transportation. The fact that the MIAA collects
terminal fees and other charges from the public does not remove the character of the Airport Lands
and Buildings as properties for public use. The operation by the government of a tollway does not
change the character of the road as one for public use. Someone must pay for the maintenance of the
road, either the public indirectly through the taxes they pay the government, or only those among the
public who actually use the road through the toll fees they pay upon using the road. The tollway
system is even a more efficient and equitable manner of taxing the public for the maintenance of
public roads.
The charging of fees to the public does not determine the character of the property whether it is
of public dominion or not. Article 420 of the Civil Code defines property of public dominion as one
intended for public use. Even if the government collects toll fees, the road is still intended for public
use if anyone can use the road under the same terms and conditions as the rest of the public. The
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charging of fees, the limitation on the kind of vehicles that can use the road, the speed restrictions and
other conditions for the use of the road do not affect the public character of the road.
The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines,
constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees
does not change the character of MIAA as an airport for public use. Such fees are often termed users
tax. This means taxing those among the public who actually use a public facility instead of taxing all
the public including those who never use the particular public facility. A users tax is more equitable a
[21]
principle of taxation mandated in the 1987 Constitution.
The Airport Lands and Buildings of MIAA, which its Charter calls the principal airport of the
[22]
Philippines for both international and domestic air traffic, are properties of public dominion
because they are intended for public use. As properties of public dominion, they indisputably
belong to the State or the Republic of the Philippines.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of
public dominion. As properties of public dominion, the Airport Lands and Buildings are outside
the commerce of man. The Court has ruled repeatedly that properties of public dominion are outside
the commerce of man. As early as 1915, this Court already ruled in Municipality of Cavite v. Rojas
that properties devoted to public use are outside the commerce of man, thus:
According to article 344 of the Civil Code: Property for public use in provinces and in towns
comprises the provincial and town roads, the squares, streets, fountains, and public waters, the
promenades, and public works of general service supported by said towns or provinces.
The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could
not in 1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit
of the defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for
private use the plaintiff municipality exceeded its authority in the exercise of its powers by executing a
contract over a thing of which it could not dispose, nor is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not outside the commerce of
man may be the object of a contract, and plazas and streets are outside of this commerce, as was
decided by the supreme court of Spain in its decision of February 12, 1895, which says: Communal
things that cannot be sold because they are by their very nature outside of commerce are those for
public use, such as the plazas, streets, common lands, rivers, fountains, etc. (Emphasis supplied)
[23]
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Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion
are outside the commerce of man:
xxx Town plazas are properties of public dominion, to be devoted to public use and to be made
available to the public in general. They are outside the commerce of man and cannot be disposed of or
even leased by the municipality to private parties. While in case of war or during an emergency, town
plazas may be occupied temporarily by private individuals, as was done and as was tolerated by the
Municipality of Pozorrubio, when the emergency has ceased, said temporary occupation or use must
also cease, and the town officials should see to it that the town plazas should ever be kept open to the
[24]
public and free from encumbrances or illegal private constructions. (Emphasis supplied)
The Court has also ruled that property of public dominion, being outside the commerce of man,
[25]
cannot be the subject of an auction sale.
Properties of public dominion, being for public use, are not subject to levy, encumbrance or
disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any
property of public dominion is void for being contrary to public policy. Essential public services will
stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale. This
will happen if the City of Paraaque can foreclose and compel the auction sale of the 600-hectare
runway of the MIAA for non-payment of real estate tax.
[26]
Before MIAA can encumber the Airport Lands and Buildings, the President must first
withdraw from public use the Airport Lands and Buildings. Sections 83 and 88 of the Public Land
Law or Commonwealth Act No. 141, which remains to this day the existing general law governing
the classification and disposition of lands of the public domain other than timber and mineral lands,
[27]
provide:
SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural Resources,
the President may designate by proclamation any tract or tracts of land of the public domain as
reservations for the use of the Republic of the Philippines or of any of its branches, or of the inhabitants
thereof, in accordance with regulations prescribed for this purposes, or for quasi-public uses or purposes
when the public interest requires it, including reservations for highways, rights of way for railroads,
hydraulic power sites, irrigation systems, communal pastures or lequas communales, public parks,
public quarries, public fishponds, working mens village and other improvements for the public benefit.
SECTION 88. The tract or tracts of land reserved under the provisions of Section eighty-
three shall be non-alienable and shall not be subject to occupation, entry, sale, lease, or other
disposition until again declared alienable under the provisions of this Act or by proclamation of
the President. (Emphasis and underscoring supplied)
Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from
public use, these properties remain properties of public dominion and are inalienable. Since the
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Airport Lands and Buildings are inalienable in their present status as properties of public dominion,
they are not subject to levy on execution or foreclosure sale. As long as the Airport Lands and
Buildings are reserved for public use, their ownership remains with the State or the Republic of the
Philippines.
The authority of the President to reserve lands of the public domain for public use, and to
withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the
Administrative Code of 1987, which states:
SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government. (1) The
President shall have the power to reserve for settlement or public use, and for specific public
purposes, any of the lands of the public domain, the use of which is not otherwise directed by law.
The reserved land shall thereafter remain subject to the specific public purpose indicated until
otherwise provided by law or proclamation;
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or
presidential proclamation from public use, they are properties of public dominion, owned by the
Republic and outside the commerce of man.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic.
Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to
hold title to real properties owned by the Republic, thus:
SEC. 48. Official Authorized to Convey Real Property. Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of
the government by the following:
(1) For property belonging to and titled in the name of the Republic of the Philippines, by the
President, unless the authority therefor is expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the name of any
political subdivision or of any corporate agency or instrumentality, by the executive head of the
agency or instrumentality. (Emphasis supplied)
In MIAAs case, its status as a mere trustee of the Airport Lands and Buildings is clearer
because even its executive head cannot sign the deed of conveyance on behalf of the Republic. Only
[28]
the President of the Republic can sign such deed of conveyance.
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d. Transfer to MIAA was Meant to Implement a Reorganization
The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and
Buildings from the Bureau of Air Transportation of the Department of Transportation and
Communications. The MIAA Charter provides:
SECTION 3. Creation of the Manila International Airport Authority. x x x x

The land where the Airport is presently located as well as the surrounding land area of
approximately six hundred hectares, are hereby transferred, conveyed and assigned to the
ownership and administration of the Authority, subject to existing rights, if any. The Bureau of
Lands and other appropriate government agencies shall undertake an actual survey of the area
transferred within one year from the promulgation of this Executive Order and the corresponding title to
be issued in the name of the Authority. Any portion thereof shall not be disposed through sale or
through any other mode unless specifically approved by the President of the Philippines.
(Emphasis supplied)
SECTION 22. Transfer of Existing Facilities and Intangible Assets. All existing public airport
facilities, runways, lands, buildings and other property, movable or immovable, belonging to the
Airport, and all assets, powers, rights, interests and privileges belonging to the Bureau of Air
Transportation relating to airport works or air operations, including all equipment which are necessary
for the operation of crash fire and rescue facilities, are hereby transferred to the Authority. (Emphasis
supplied)
SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air
Transportation and Transitory Provisions. The Manila International Airport including the Manila
Domestic Airport as a division under the Bureau of Air Transportation is hereby abolished.
x x x x.
The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic
receiving cash, promissory notes or even stock since MIAA is not a stock corporation.
The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands
and Buildings to MIAA, thus:
WHEREAS, the Manila International Airport as the principal airport of the Philippines for both
international and domestic air traffic, is required to provide standards of airport accommodation and
service comparable with the best airports in the world;
WHEREAS, domestic and other terminals, general aviation and other facilities, have to be upgraded to
meet the current and future air traffic and other demands of aviation in Metro Manila;
WHEREAS, a management and organization study has indicated that the objectives of providing high
standards of accommodation and service within the context of a financially viable operation, will
best be achieved by a separate and autonomous body; and
WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, the
President of the Philippines is given continuing authority to reorganize the National Government,
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which authority includes the creation of new entities, agencies and instrumentalities of the
Government[.] (Emphasis supplied)
The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to
MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA.
The purpose was merely to reorganize a division in the Bureau of Air Transportation into a
separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands
and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights
over MIAAs assets adverse to the Republic.
The MIAA Charter expressly provides that the Airport Lands and Buildings shall not be
disposed through sale or through any other mode unless specifically approved by the President
of the Philippines. This only means that the Republic retained the beneficial ownership of the Airport
Lands and Buildings because under Article 428 of the Civil Code, only the owner has the right to x x
x dispose of a thing. Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not
own the Airport Lands and Buildings.
At any time, the President can transfer back to the Republic title to the Airport Lands and
Buildings without the Republic paying MIAA any consideration. Under Section 3 of the MIAA
Charter, the President is the only one who can authorize the sale or disposition of the Airport Lands
and Buildings. This only confirms that the Airport Lands and Buildings belong to the Republic.
e. Real Property Owned by the Republic is Not Taxable

Section 234(a) of the Local Government Code exempts from real estate tax any [r]eal property
owned by the Republic of the Philippines. Section 234(a) provides:
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of
the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person;
x x x. (Emphasis supplied)
This exemption should be read in relation with Section 133(o) of the same Code, which
prohibits local governments from imposing [t]axes, fees or charges of any kind on the National
Government, its agencies and instrumentalities x x x. The real properties owned by the Republic are
titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the
National Government. The Administrative Code allows real property owned by the Republic to be
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titled in the name of agencies or instrumentalities of the national government. Such real properties
remain owned by the Republic and continue to be exempt from real estate tax.
The Republic may grant the beneficial use of its real property to an agency or instrumentality
of the national government. This happens when title of the real property is transferred to an agency or
instrumentality even as the Republic remains the owner of the real property. Such arrangement does
not result in the loss of the tax exemption. Section 234(a) of the Local Government Code states that
real property owned by the Republic loses its tax exemption only if the beneficial use thereof has
been granted, for consideration or otherwise, to a taxable person. MIAA, as a government
instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus,
even if we assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and
Buildings, such fact does not make these real properties subject to real estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to private entities are
not exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to
private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use
of such land area for a consideration to a taxable person and therefore such land area is subject to
real estate tax. In Lung Center of the Philippines v. Quezon City, the Court ruled:
Accordingly, we hold that the portions of the land leased to private entities as well as those parts
of the hospital leased to private individuals are not exempt from such taxes. On the other hand, the
portions of the land occupied by the hospital and portions of the hospital used for its patients, whether
[29]
paying or non-paying, are exempt from real property taxes.
3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of
the Local Government Code of 1991 withdrew the tax exemption of all persons, whether natural or
juridical upon the effectivity of the Code. Section 193 provides:
SEC. 193. Withdrawal of Tax Exemption Privileges Unless otherwise provided in this Code,
tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or
juridical, including government-owned or controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational
institutions are hereby withdrawn upon effectivity of this Code. (Emphasis supplied)
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The minority states that MIAA is indisputably a juridical person. The minority argues that
since the Local Government Code withdrew the tax exemption of all juridical persons, then MIAA
is not exempt from real estate tax. Thus, the minority declares:
It is evident from the quoted provisions of the Local Government Code that the withdrawn
exemptions from realty tax cover not just GOCCs, but all persons. To repeat, the provisions lay
down the explicit proposition that the withdrawal of realty tax exemption applies to all persons. The
reference to or the inclusion of GOCCs is only clarificatory or illustrative of the explicit provision.
The term All persons encompasses the two classes of persons recognized under our laws,
natural and juridical persons. Obviously, MIAA is not a natural person. Thus, the determinative
test is not just whether MIAA is a GOCC, but whether MIAA is a juridical person at all.
(Emphasis and underscoring in the original)
The minority posits that the determinative test whether MIAA is exempt from local taxation is
its status whether MIAA is a juridical person or not. The minority also insists that Sections 193
and 234 may be examined in isolation from Section 133(o) to ascertain MIAAs claim of
exemption.
The argument of the minority is fatally flawed. Section 193 of the Local Government Code
expressly withdrew the tax exemption of all juridical persons [u]nless otherwise provided in this
Code. Now, Section 133(o) of the Local Government Code expressly provides otherwise,
specifically prohibiting local governments from imposing any kind of tax on national government
instrumentalities. Section 133(o) states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kinds on the National Government, its agencies and
instrumentalities, and local government units. (Emphasis and underscoring supplied)
By express mandate of the Local Government Code, local governments cannot impose any
kind of tax on national government instrumentalities like the MIAA. Local governments are devoid
of power to tax the national government, its agencies and instrumentalities. The taxing powers of
local governments do not extend to the national government, its agencies and instrumentalities,
[u]nless otherwise provided in this Code as stated in the saving clause of Section 133. The saving
clause refers to Section 234(a) on the exception to the exemption from real estate tax of real property
owned by the Republic.
The minority, however, theorizes that unless exempted in Section 193 itself, all juridical
persons are subject to tax by local governments. The minority insists that the juridical persons
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exempt from local taxation are limited to the three classes of entities specifically enumerated as
exempt in Section 193. Thus, the minority states:
x x x Under Section 193, the exemption is limited to (a) local water districts; (b) cooperatives duly
registered under Republic Act No. 6938; and (c) non-stock and non-profit hospitals and
educational institutions. It would be belaboring the obvious why the MIAA does not fall within any of
the exempt entities under Section 193. (Emphasis supplied)
The minoritys theory directly contradicts and completely negates Section 133(o) of the Local
Government Code. This theory will result in gross absurdities. It will make the national government,
which itself is a juridical person, subject to tax by local governments since the national government
is not included in the enumeration of exempt entities in Section 193. Under this theory, local
governments can impose any kind of local tax, and not only real estate tax, on the national
government.
Under the minoritys theory, many national government instrumentalities with juridical
personalities will also be subject to any kind of local tax, and not only real estate tax. Some of the
national government instrumentalities vested by law with juridical personalities are: Bangko
[30] [31]
Sentral ng Pilipinas, Philippine Rice Research Institute, Laguna Lake
[32] [33]
Development Authority, Fisheries Development Authority, Bases Conversion Development
[34] [35] [36]
Authority, Philippine Ports Authority, Cagayan de Oro Port Authority, San Fernando Port
[37] [38] [39]
Authority, Cebu Port Authority, and Philippine National Railways.
The minoritys theory violates Section 133(o) of the Local Government Code which expressly
prohibits local governments from imposing any kind of tax on national government instrumentalities.
Section 133(o) does not distinguish between national government instrumentalities with or
without juridical personalities. Where the law does not distinguish, courts should not distinguish.
Thus, Section 133(o) applies to all national government instrumentalities, with or without juridical
personalities. The determinative test whether MIAA is exempt from local taxation is not whether
MIAA is a juridical person, but whether it is a national government instrumentality under Section
133(o) of the Local Government Code. Section 133(o) is the specific provision of law prohibiting
local governments from imposing any kind of tax on the national government, its agencies and
instrumentalities.
Section 133 of the Local Government Code starts with the saving clause [u]nless otherwise provided
in this Code. This means that unless the Local Government Code grants an express authorization,
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local governments have no power to tax the national government, its agencies and instrumentalities.
Clearly, the rule is local governments have no power to tax the national government, its agencies and
instrumentalities. As an exception to this rule, local governments may tax the national government, its
agencies and instrumentalities only if the Local Government Code expressly so provides.
The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of
the Code, which makes the national government subject to real estate tax when it gives the beneficial
use of its real properties to a taxable entity. Section 234(a) of the Local Government Code
provides:
SEC. 234. Exemptions from Real Property Tax The following are exempted from payment of
the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person.
x x x. (Emphasis supplied)
Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The
exception to this exemption is when the government gives the beneficial use of the real property to a
taxable entity.
The exception to the exemption in Section 234(a) is the only instance when the national
government, its agencies and instrumentalities are subject to any kind of tax by local
governments. The exception to the exemption applies only to real estate tax and not to any other tax.
The justification for the exception to the exemption is that the real property, although owned by the
Republic, is not devoted to public use or public service but devoted to the private gain of a taxable
person.
The minority also argues that since Section 133 precedes Section 193 and 234 of the Local
Government Code, the later provisions prevail over Section 133. Thus, the minority asserts:
x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an accepted rule of
construction, in case of conflict the subsequent provisions should prevail. Therefore, MIAA, as a
juridical person, is subject to real property taxes, the general exemptions attaching to instrumentalities
under Section 133(o) of the Local Government Code being qualified by Sections 193 and 234 of the
same law. (Emphasis supplied)
The minority assumes that there is an irreconcilable conflict between Section 133 on one hand,
and Sections 193 and 234 on the other. No one has urged that there is such a conflict, much less has
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any one presented a persuasive argument that there is such a conflict. The minoritys assumption of an
irreconcilable conflict in the statutory provisions is an egregious error for two reasons.
First, there is no conflict whatsoever between Sections 133 and 193 because Section 193
expressly admits its subordination to other provisions of the Code when Section 193 states
[u]nless otherwise provided in this Code. By its own words, Section 193 admits the superiority of
other provisions of the Local Government Code that limit the exercise of the taxing power in Section
193. When a provision of law grants a power but withholds such power on certain matters, there is no
conflict between the grant of power and the withholding of power. The grantee of the power simply
cannot exercise the power on matters withheld from its power.
Second, Section 133 is entitled Common Limitations on the Taxing Powers of Local Government
Units. Section 133 limits the grant to local governments of the power to tax, and not merely the
exercise of a delegated power to tax. Section 133 states that the taxing powers of local governments
shall not extend to the levy of any kind of tax on the national government, its agencies and
instrumentalities. There is no clearer limitation on the taxing power than this.
Since Section 133 prescribes the common limitations on the taxing powers of local
governments, Section 133 logically prevails over Section 193 which grants local governments such
taxing powers. By their very meaning and purpose, the common limitations on the taxing power
prevail over the grant or exercise of the taxing power. If the taxing power of local governments in
Section 193 prevails over the limitations on such taxing power in Section 133, then local governments
can impose any kind of tax on the national government, its agencies and instrumentalities a gross
absurdity.
Local governments have no power to tax the national government, its agencies and
instrumentalities, except as otherwise provided in the Local Government Code pursuant to the saving
clause in Section 133 stating [u]nless otherwise provided in this Code. This exception which is an
exception to the exemption of the Republic from real estate tax imposed by local governments refers
to Section 234(a) of the Code. The exception to the exemption in Section 234(a) subjects real
property owned by the Republic, whether titled in the name of the national government, its agencies
or instrumentalities, to real estate tax if the beneficial use of such property is given to a taxable entity.
The minority also claims that the definition in the Administrative Code of the phrase government-
owned or controlled corporation is not controlling. The minority points out that Section 2 of the
Introductory Provisions of the Administrative Code admits that its definitions are not controlling
when it provides:
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SEC. 2. General Terms Defined. Unless the specific words of the text, or the context as a whole,
or a particular statute, shall require a different meaning:
xxxx
The minority then concludes that reliance on the Administrative Code definition is flawed.
The minoritys argument is a non sequitur. True, Section 2 of the Administrative Code recognizes that
a statute may require a different meaning than that defined in the Administrative Code. However, this
does not automatically mean that the definition in the Administrative Code does not apply to the
Local Government Code. Section 2 of the Administrative Code clearly states that unless the specific
words x x x of a particular statute shall require a different meaning, the definition in Section 2 of
the Administrative Code shall apply. Thus, unless there is specific language in the Local Government
Code defining the phrase government-owned or controlled corporation differently from the definition
in the Administrative Code, the definition in the Administrative Code prevails.
The minority does not point to any provision in the Local Government Code defining the phrase
government-owned or controlled corporation differently from the definition in the Administrative
Code. Indeed, there is none. The Local Government Code is silent on the definition of the phrase
government-owned or controlled corporation. The Administrative Code, however, expressly
defines the phrase government-owned or controlled corporation. The inescapable conclusion is that
the Administrative Code definition of the phrase government-owned or controlled corporation applies
to the Local Government Code.
The third whereas clause of the Administrative Code states that the Code incorporates in a unified
document the major structural, functional and procedural principles and rules of governance.
Thus, the Administrative Code is the governing law defining the status and relationship of
government departments, bureaus, offices, agencies and instrumentalities. Unless a statute expressly
provides for a different status and relationship for a specific government unit or entity, the provisions
of the Administrative Code prevail.
The minority also contends that the phrase government-owned or controlled corporation should apply
only to corporations organized under the Corporation Code, the general incorporation law, and not to
corporations created by special charters. The minority sees no reason why government corporations
with special charters should have a capital stock. Thus, the minority declares:
I submit that the definition of government-owned or controlled corporations under the

Administrative Code refer to those corporations owned by the government or its instrumentalities which
are created not by legislative enactment, but formed and organized under the Corporation Code through
registration with the Securities and Exchange Commission. In short, these are GOCCs without original
charters.
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xxxx
It might as well be worth pointing out that there is no point in requiring a capital structure for
GOCCs whose full ownership is limited by its charter to the State or Republic. Such GOCCs are not
empowered to declare dividends or alienate their capital shares.
The contention of the minority is seriously flawed. It is not in accord with the Constitution and
existing legislations. It will also result in gross absurdities.
First, the Administrative Code definition of the phrase government-owned or controlled corporation
does not distinguish between one incorporated under the Corporation Code or under a special charter.
Where the law does not distinguish, courts should not distinguish.
Second, Congress has created through special charters several government-owned corporations
organized as stock corporations. Prime examples are the Land Bank of the Philippines and the
[40]
Development Bank of the Philippines. The special charter of the Land Bank of the Philippines
provides:
SECTION 81. Capital. The authorized capital stock of the Bank shall be nine billion pesos,
divided into seven hundred and eighty million common shares with a par value of ten pesos each,
which shall be fully subscribed by the Government, and one hundred and twenty million preferred
shares with a par value of ten pesos each, which shall be issued in accordance with the provisions of
Sections seventy-seven and eighty-three of this Code. (Emphasis supplied)
[41]
Likewise, the special charter of the Development Bank of the Philippines provides:
SECTION 7. Authorized Capital Stock Par value. The capital stock of the Bank shall be Five
Billion Pesos to be divided into Fifty Million common shares with par value of P100 per share.
These shares are available for subscription by the National Government. Upon the effectivity of this
Charter, the National Government shall subscribe to Twenty-Five Million common shares of stock
worth Two Billion Five Hundred Million which shall be deemed paid for by the Government with the
net asset values of the Bank remaining after the transfer of assets and liabilities as provided in Section
30 hereof. (Emphasis supplied)
Other government-owned corporations organized as stock corporations under their special

[42]
charters are the Philippine Crop Insurance Corporation, Philippine International Trading
[43] [44]
Corporation, and the Philippine National Bank before it was reorganized as a stock
corporation under the Corporation Code. All these government-owned corporations organized under
special charters as stock corporations are subject to real estate tax on real properties owned by them.
To rule that they are not government-owned or controlled corporations because they are not registered
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with the Securities and Exchange Commission would remove them from the reach of Section 234 of
the Local Government Code, thus exempting them from real estate tax.
Third, the government-owned or controlled corporations created through special charters are
those that meet the two conditions prescribed in Section 16, Article XII of the Constitution. The first
condition is that the government-owned or controlled corporation must be established for the common
good. The second condition is that the government-owned or controlled corporation must meet
the test of economic viability. Section 16, Article XII of the 1987 Constitution provides:
SEC. 16. The Congress shall not, except by general law, provide for the formation, organization,
or regulation of private corporations. Government-owned or controlled corporations may be created
or established by special charters in the interest of the common good and subject to the test of
economic viability. (Emphasis and underscoring supplied)
The Constitution expressly authorizes the legislature to create government-owned or controlled

corporations through special charters only if these entities are required to meet the twin conditions of
common good and economic viability. In other words, Congress has no power to create
government-owned or controlled corporations with special charters unless they are made to
comply with the two conditions of common good and economic viability. The test of economic
viability applies only to government-owned or controlled corporations that perform economic or
commercial activities and need to compete in the market place. Being essentially economic vehicles
of the State for the common good meaning for economic development purposes these government-
owned or controlled corporations with special charters are usually organized as stock corporations just
like ordinary private corporations.
In contrast, government instrumentalities vested with corporate powers and performing

governmental or public functions need not meet the test of economic viability. These instrumentalities
perform essential public services for the common good, services that every modern State must
provide its citizens. These instrumentalities need not be economically viable since the government
may even subsidize their entire operations. These instrumentalities are not the government-owned or
controlled corporations referred to in Section 16, Article XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates government
instrumentalities vested with corporate powers but performing essential governmental or public
functions. Congress has plenary authority to create government instrumentalities vested with
corporate powers provided these instrumentalities perform essential government functions or
public services. However, when the legislature creates through special charters corporations that
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perform economic or commercial activities, such entities known as government-owned or controlled

corporations must meet the test of economic viability because they compete in the market place.
This is the situation of the Land Bank of the Philippines and the Development Bank of the
Philippines and similar government-owned or controlled corporations, which derive their income to
meet operating expenses solely from commercial transactions in competition with the private sector.
The intent of the Constitution is to prevent the creation of government-owned or controlled
corporations that cannot survive on their own in the market place and thus merely drain the public
coffers.
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the
Constitutional Commission the purpose of this test, as follows:
MR. OPLE: Madam President, the reason for this concern is really that when the government
creates a corporation, there is a sense in which this corporation becomes exempt from the test of
economic performance. We know what happened in the past. If a government corporation loses, then it
makes its claim upon the taxpayers money through new equity infusions from the government and what
is always invoked is the common good. That is the reason why this year, out of a budget of P115 billion
for the entire government, about P28 billion of this will go into equity infusions to support a few
government financial institutions. And this is all taxpayers money which could have been relocated to
agrarian reform, to social services like health and education, to augment the salaries of grossly
underpaid public employees. And yet this is all going down the drain.
Therefore, when we insert the phrase ECONOMIC VIABILITY together with the common
good, this becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the
responsibility of meeting the market test so that they become viable. And so, Madam President, I
reiterate, for the committees consideration and I am glad that I am joined in this proposal by
Commissioner Foz, the insertion of the standard of ECONOMIC VIABILITY OR THE ECONOMIC
[45]
TEST, together with the common good.
Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his
textbook The 1987 Constitution of the Republic of the Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission. The significant
addition, however, is the phrase in the interest of the common good and subject to the test of
economic viability. The addition includes the ideas that they must show capacity to function
efficiently in business and that they should not go into activities which the private sector can do
better. Moreover, economic viability is more than financial viability but also includes capability to
[46]
make profit and generate benefits not quantifiable in financial terms. (Emphasis supplied)
Clearly, the test of economic viability does not apply to government entities vested with
corporate powers and performing essential public services. The State is obligated to render essential
public services regardless of the economic viability of providing such service. The non-economic
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viability of rendering such essential public service does not excuse the State from withholding such
essential services from the public.
However, government-owned or controlled corporations with special charters, organized
essentially for economic or commercial objectives, must meet the test of economic viability. These
are the government-owned or controlled corporations that are usually organized under their special
charters as stock corporations, like the Land Bank of the Philippines and the Development Bank of
the Philippines. These are the government-owned or controlled corporations, along with government-
owned or controlled corporations organized under the Corporation Code, that fall under the definition
of government-owned or controlled corporations in Section 2(10) of the Administrative Code.
The MIAA need not meet the test of economic viability because the legislature did not create
MIAA to compete in the market place. MIAA does not compete in the market place because there is
no competing international airport operated by the private sector. MIAA performs an essential public
service as the primary domestic and international airport of the Philippines. The operation of an
international airport requires the presence of personnel from the following government agencies:
1. The Bureau of Immigration and Deportation, to document the arrival and departure of
passengers, screening out those without visas or travel documents, or those with hold departure
orders;
2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited
importations;
3. The quarantine office of the Department of Health, to enforce health measures against the
spread of infectious diseases into the country;
4. The Department of Agriculture, to enforce measures against the spread of plant and animal
diseases into the country;
5. The Aviation Security Command of the Philippine National Police, to prevent the entry of
terrorists and the escape of criminals, as well as to secure the airport premises from terrorist
attack or seizure;
6. The Air Traffic Office of the Department of Transportation and Communications, to

authorize aircraft to enter or leave Philippine airspace, as well as to land on, or take off from,
the airport; and
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7. The MIAA, to provide the proper premises such as runway and buildings for the
government personnel, passengers, and airlines, and to manage the airport operations.
All these agencies of government perform government functions essential to the operation of an
international airport.
MIAA performs an essential public service that every modern State must provide its citizens.
MIAA derives its revenues principally from the mandatory fees and charges MIAA imposes on
passengers and airlines. The terminal fees that MIAA charges every passenger are regulatory or
[47]
administrative fees and not income from commercial transactions.
MIAA falls under the definition of a government instrumentality under Section 2(10) of the
Introductory Provisions of the Administrative Code, which provides:
(10) Instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if not
all corporate powers, administering special funds, and enjoying operational autonomy, usually
through a charter. x x x (Emphasis supplied)
The fact alone that MIAA is endowed with corporate powers does not make MIAA a government-
owned or controlled corporation. Without a change in its capital structure, MIAA remains a
government instrumentality under Section 2(10) of the Introductory Provisions of the Administrative
Code. More importantly, as long as MIAA renders essential public services, it need not comply with
the test of economic viability. Thus, MIAA is outside the scope of the phrase government-owned or
controlled corporations under Section 16, Article XII of the 1987 Constitution.
The minority belittles the use in the Local Government Code of the phrase government-owned
or controlled corporation as merely clarificatory or illustrative. This is fatal. The 1987 Constitution
prescribes explicit conditions for the creation of government-owned or controlled corporations. The
Administrative Code defines what constitutes a government-owned or controlled corporation. To
belittle this phrase as clarificatory or illustrative is grave error.
To summarize, MIAA is not a government-owned or controlled corporation under Section

2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock
or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under
Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of
economic viability. MIAA is a government instrumentality vested with corporate powers and
performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the
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Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by
local governments under Section 133(o) of the Local Government Code. The exception to the
exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the
Local Government Code. Such exception applies only if the beneficial use of real property owned by
the Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus
are properties of public dominion. Properties of public dominion are owned by the State or the
Republic. Article 420 of the Civil Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by
the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth. (Emphasis supplied)
The term ports x x x constructed by the State includes airports and seaports. The Airport
Lands and Buildings of MIAA are intended for public use, and at the very least intended for public
service. Whether intended for public use or public service, the Airport Lands and Buildings are
properties of public dominion. As properties of public dominion, the Airport Lands and Buildings
are owned by the Republic and thus exempt from real estate tax under Section 234(a) of the Local
Government Code.
4. Conclusion
Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which
governs the legal relation and status of government units, agencies and offices within the entire
government machinery, MIAA is a government instrumentality and not a government-owned or
controlled corporation. Under Section 133(o) of the Local Government Code, MIAA as a government
instrumentality is not a taxable person because it is not subject to [t]axes, fees or charges of any kind
by local governments. The only exception is when MIAA leases its real property to a taxable person
as provided in Section 234(a) of the Local Government Code, in which case the specific real property
leased becomes subject to real estate tax. Thus, only portions of the Airport Lands and Buildings
leased to taxable persons like private parties are subject to real estate tax by the City of Paraaque.
1/28/2018 G.R. No. 155650
Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to
public use, are properties of public dominion and thus owned by the State or the Republic of the
Philippines. Article 420 specifically mentions ports x x x constructed by the State, which includes
public airports and seaports, as properties of public dominion and owned by the Republic. As
properties of public dominion owned by the Republic, there is no doubt whatsoever that the Airport
Lands and Buildings are expressly exempt from real estate tax under Section 234(a) of the Local
Government Code. This Court has also repeatedly ruled that properties of public dominion are not
subject to execution or foreclosure sale.
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the
Court of Appeals of 5 October 2001 and 27 September 2002 in CA-G.R. SP No. 66878. We
DECLARE the Airport Lands and Buildings of the Manila International Airport Authority EXEMPT
from the real estate tax imposed by the City of Paraaque. We declare VOID all the real estate tax
assessments, including the final notices of real estate tax delinquencies, issued by the City of
Paraaque on the Airport Lands and Buildings of the Manila International Airport Authority, except for
the portions that the Manila International Airport Authority has leased to private parties. We also
declare VOID the assailed auction sale, and all its effects, of the Airport Lands and Buildings of the
Manila International Airport Authority.
No costs.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
REYNATO S. PUNO LEONARDO A. QUISUMBING

Associate Justice Associate Justice
1/28/2018 G.R. No. 155650
CONSUELO YNARES- ANGELINA SANDOVAL-

SANTIAGO GUTIERREZ
MA. ALICIA AUSTRIA- RENATO C. CORONA

MARTINEZ Associate Justice
Associate Justice
CONCHITA CARPIO ROMEO J. CALLEJO, SR.

MORALES Associate Justice
Associate Justice
ADOLFO S. AZCUNA DANTE O. TINGA

MINITA V. CHICO-NAZARIO CANCIO C. GARCIA

PRESBITERO J. VELASCO, JR.

Associate Justice
CERTIFICATION
1/28/2018 G.R. No. 155650
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion of
the Court.
ARTEMIO V. PANGANIBAN
Chief Justice
[1]
Dated 16 September 1983.
[2]
Dated 26 July 1987.
[3]
Section 3, MIAA Charter.
[4]
[5]
[6]
Rollo, pp. 22-23.
[7]
Under Rule 45 of the 1997 Rules of Civil Procedure.
[8]
330 Phil. 392 (1996).
[9]
MIAA Charter as amended by Executive Order No. 298. See note 2.
[10]
Batas Pambansa Blg. 68.
[11]
Section 11 of the MIAA Charter provides:
Contribution to the General Fund for the Maintenance and Operation of other Airports. Within thirty (30) days
after the close of each quarter, twenty percentum (20%) of the gross operating income, excluding payments for utilities of
tenants and concessionaires and terminal fee collections, shall be remitted to the General Fund in the National Treasury to be
used for the maintenance and operation of other international and domestic airports in the country. Adjustments in the
amount paid by the Authority to the National Treasury under this Section shall be made at the end of each year based on the
audited financial statements of the Authority.
[12]
Section 5(j), MIAA Charter.
[13]
[14]
Section 5(k), MIAA Charter.
1/28/2018 G.R. No. 155650
[15]
Section 5(o), MIAA Charter.
[16]
Third Whereas Clause, MIAA Charter.
[17]
Id.
[18]
CONSTITUTION, Art. X, Sec. 5.
[19]
274 Phil. 1060, 1100 (1991) quoting C. Dallas Sands, 3 STATUTES and STATUTORY CONSTRUCTION 207.
[20]
274 Phil. 323, 339-340 (1991).
[21]
CONSTITUTION, Art. VI, Sec. 28(1).
[22]
First Whereas Clause, MIAA Charter.
[23]
30 Phil. 602, 606-607 (1915).
[24]
102 Phil. 866, 869-870 (1958).
[25]
PNB v. Puruganan, 130 Phil. 498 (1968). See also Martinez v. CA, 155 Phil. 591 (1974).
[26]
MIAA Charter, Sec.16.
[27]
Chavez v. Public Estates Authority, 433 Phil. 506 (2002).
[28]
[29]
G.R. No. 144104, 29 June 2004, 433 SCRA 119, 138.
[30]
Republic Act No. 7653, 14 June 1993, Sec. 5.
[31]
Executive Order No. 1061, 5 November 1985, Sec. 3(p).
[32]
Republic Act No. 4850, 18 July 1966, Sec. 5.
[33]
Presidential Decree No. 977, 11 August 1976, Section 4(j).
[34]
Republic Act No. 7227, 13 March 1992, Sec. 3.
[35]
Presidential Decree No. 857, 23 December 1975, Sec. 6(b)(xvi).
[36]
Republic Act No. 4663, 18 June 1966, Sec. 7(m).
[37]
[38]
[39]
Republic Act No. 4156, 20 June 1964. Section 4(b).
[40]
Republic Act No. 3844, 8 August 1963, as amended by Republic Act No. 7907, 23 February 1995.
[41]
Executive Order No. 81, 3 December 1986.
[42]
Republic Act No. 8175, 29 December 1995.
[43]
Presidential Decree No. 252, 21 July 1973, as amended by Presidential Decree No. 1071, 25 January 1977 and Executive Order No. 1067,
25 November 1985.
[44]
Executive Order No. 80, 3 December 1986.
[45]
III RECORDS, CONSTITUTIONAL COMMISSION 63 (22 August 1986).
1/28/2018 G.R. No. 155650
[46]
2003 ed., 1181.
[47]
Manila International Airport Authority v. Airspan Corporation, G.R. No. 157581, 1 December 2004, 445 SCRA 471.

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MANILA INTERNATIONAL G.R. No. 155650

TAX DECLARATION TAXABLE TAX DUE PENALTY TOTAL

The Courts Ruling

First, MIAA is not a government-owned or controlled corporation but an instrumentality of the

1. MIAA is Not a Government-Owned or Controlled Corporation

Respondents argue that MIAA, being a government-owned or controlled corporation, is not

SEC. 2. General Terms Defined. x x x x

(13) Government-owned or controlled corporation refers to any agency organized as a stock or

A government-owned or controlled corporation must be organized as a stock or non-stock

MIAA is a government instrumentality vested with corporate powers to perform efficiently

SEC. 2. General Terms Defined. x x x x

The states have no power by taxation or otherwise, to retard, impede, burden or

2. Airport Lands and Buildings of MIAA are Owned by the Republic

a. Airport Lands and Buildings are of Public Dominion

ARTICLE 419. Property is either of public dominion or of private ownership.

ARTICLE 420. The following things are property of public dominion:

b. Airport Lands and Buildings are Outside the Commerce of Man

c. MIAA is a Mere Trustee of the Republic

d. Transfer to MIAA was Meant to Implement a Reorganization

SECTION 3. Creation of the Manila International Airport Authority. x x x x

e. Real Property Owned by the Republic is Not Taxable

3. Refutation of Arguments of Minority

I submit that the definition of government-owned or controlled corporations under the

Other government-owned corporations organized as stock corporations under their special

The Constitution expressly authorizes the legislature to create government-owned or controlled

In contrast, government instrumentalities vested with corporate powers and performing

perform economic or commercial activities, such entities known as government-owned or controlled

6. The Air Traffic Office of the Department of Transportation and Communications, to

SEC. 2. General Terms Defined. x x x x

To summarize, MIAA is not a government-owned or controlled corporation under Section

Art. 420. The following things are property of public dominion:

REYNATO S. PUNO LEONARDO A. QUISUMBING

CONSUELO YNARES- ANGELINA SANDOVAL-

MA. ALICIA AUSTRIA- RENATO C. CORONA

CONCHITA CARPIO ROMEO J. CALLEJO, SR.

ADOLFO S. AZCUNA DANTE O. TINGA

MINITA V. CHICO-NAZARIO CANCIO C. GARCIA

PRESBITERO J. VELASCO, JR.

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